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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The most desirable alternative given up as the result of a decision
Price Ceiling
Opportunity Cost
Marginal tax rate
Accounting Profit
2. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Marginal Resource Cost (MRC)
Derived Demand
Absolute Advantage
Allocative Efficiency
3. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Marginal tax rate
Absolute prices
Implicit costs
Diseconomies of Scale
4. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Price floor
Public goods
Marginal Productivity Theory
Specialization
5. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Total Product of Labor (TPL)
Public goods
Normal Goods
Substitution Effect
6. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption
Average Variable Cost (AVC)
Diseconomies of Scale
Private goods
Absolute prices
7. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Economics
Substitution Effect
Positive externality
Profit Maximizing Resource Employment
8. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Accounting Profit
Total Product of Labor (TPL)
Increasing Cost Industry
Law of Increasing Costs
9. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Determinants of Supply
Market Equilibrium
Relative Prices
Perfect competition
10. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Price elasticity
Long Run
Market power
Derived Demand
11. Ei = (%dQd good X)/(%d Income)
Fixed inputs
Positive externality
Income Elasticity
Total Welfare
12. Exists if a producer can produce more of a good than all other producers
Absolute Advantage
Marginal Analysis
Price inelastic demand
Economics
13. A good for which higher income increases demand
Price Elasticity of Supply
Comparative Advantage
Normal Goods
Necessity
14. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price
Unit elastic demand
Fixed inputs
Market power
Consumer surplus
15. Occurs when LRAC is constant over a variety of plant sizes
Subsidy
Productive Efficiency
Price Elasticity of Supply
Constant Returns to Scale
16. All firms maximize profit by producing where MR = MC
Profit Maximizing Rule
Market Economy (Capitalism)
Total Fixed Costs (TFC)
Marginal Productivity Theory
17. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Increasing Cost Industry
Price floor
Total Fixed Costs (TFC)
Inferior Goods
18. The imbalance between limited productive resources and unlimited human wants
Determinants of Demand
Profit Maximizing Rule
Total Product of Labor (TPL)
Scarcity
19. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Short run
Price elasticity
Total variable costs (TVC)
Natural Monopoly
20. The ability to set the price above the perfectly competitive level
Monopolistic competition long-run equilibrium
Complementary Goods
Production function
Market power
21. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Absolute Advantage
Complementary Goods
Productive Efficiency
Excise Tax
22. Ei > 1
Luxury
Average Fixed Cost (AFC)
Law of Supply
Price Ceiling
23. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Accounting Profit
Monopolistic competition
Price floor
Producer surplus
24. Product demand - productivity - prices of other resources - and complementary resources
Marginal Cost (MC)
Determinants of Labor Demand
Law of Increasing Costs
Short run
25. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Explicit costs
Profit Maximizing Resource Employment
Non-collusive oligopoly
Price inelastic demand
26. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Monopolistic competition
Income Elasticity
Subsidy
Cross-Price Elasticity of Demand
27. The difference between total revenue and total explicit and implicit costs
Law of Demand
Economic Profit
Excess Capacity
Spillover benefits
28. ATC = TC/Q = AFC + AVC
Average Total Cost (ATC)
Productive Efficiency
Private goods
Surplus
29. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Marginal tax rate
Marginal Cost (MC)
Marginal Product of Labor (MPL)
Price Elasticity of Supply
30. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Constant Returns to Scale
Perfectly competitive long-run equilibrium
Subsidy
Law of Supply
31. The total quantity - or total output of a good produced at each quantity of labor employed
Perfectly inelastic
Incidence of Tax
Total variable costs (TVC)
Total Product of Labor (TPL)
32. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Normal Goods
Determinants of Demand
Inferior Goods
Monopoly
33. The additional benefit received from the consumption of the next unit of a good or service
Marginal Benefit (MB)
Resources
Opportunity Cost
Monopolistic competition long-run equilibrium
34. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Law of Demand
Total Revenue
Spillover benefits
Demand for Labor
35. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Determinants of elasticity
Income Elasticity
Non-collusive oligopoly
Constant cost industry
36. Ed = 8 - infinite change in demand to price change
Perfectly elastic
Total Revenue Test
Producer surplus
Total variable costs (TVC)
37. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Absolute prices
Fixed inputs
Determinants of Demand
Average Fixed Cost (AFC)
38. Exists if a producer can produce a good at lower opportunity cost than all other producers
Comparative Advantage
Marginal Resource Cost (MRC)
Economics
Short run
39. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Producer surplus
Price elastic demand
Resources
Normal Goods
40. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Public goods
Perfect competition
Price Ceiling
Profit Maximizing Rule
41. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Marginal Productivity Theory
Demand for Labor
Constrained Utility Maximization
Incidence of Tax
42. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.
Constant Returns to Scale
Economies of Scale
Average Total Cost (ATC)
Diseconomies of Scale
43. The rational decision maker chooses an action if MB = MC
Income Elasticity
Average Fixed Cost (AFC)
Marginal Analysis
Accounting Profit
44. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Total Revenue Test
Necessity
Decreasing Cost industry
Determinants of Demand
45. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Negative externality
Constrained Utility Maximization
Profit Maximizing Resource Employment
Monopoly long-run equilibrium
46. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Substitute Goods
Variable inputs
Monopolistic competition
Demand for Labor
47. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Marginal Resource Cost (MRC)
Price Ceiling
Opportunity Cost
Excess Capacity
48. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Price Ceiling
Excess Capacity
Marginal Resource Cost (MRC)
Total Fixed Costs (TFC)
49. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Collusive oligopoly
Short run
Productive Efficiency
Law of Demand
50. The practice of selling essentially the same good to different groups of consumers at different prices
Complementary Goods
Unit elastic demand
Non-collusive oligopoly
Price discrimination